Kiwisaver Strategy

[audiav]

I do have a Kernel account, only hold Global 100 and Infrastructure unhedged

Sorry Jaa, just realised you were asking who my Kiwisaver provider is, it is Milford Growth, like Iceman. I’ve been with them since 2009.

[Bjauck]

I don't mind you asking. I actually decided to go to Milford Growth Fund. It is an actively managed fund and is quite concentrated in a few stocks that are not your normal run of the mill in passively managed funds. I liked what I saw and will be watching it closely and possibly moving to a passively managed index tracking fund quickly if I don't like it. So a bit of a punt, but my punt.

I lost faith in Simplicity when they started several schemes they think is "socially responsible" and then invest my retirement savings in these schemes without me having a say in it. Simplicity scares the **** out of me now.

Milford’s active growth? I have my KiwiSaver split between Milf’s active growth, balanced and aggressive. I have changed the mix proportions a couple of times. They supply good information and have good online access. The returns seem to be above the industry averages. Certainly more detailed information and more flexibility than the big bank scheme I was initially with.

[Ricky-bobby]

I’m the same, just pulled some back from aggressive to balanced… 50% growth, 25% balanced, 25% aggressive

[Snoopy]

I lost faith in Simplicity when they started several schemes they think is "socially responsible" and then invest my retirement savings in these schemes without me having a say in it. Simplicity scares the **** out of me now.

Are you referring to this fund?
https://simplicity.kiwi/investment-f...nd-income-fund

It is certainly a novel approach to an investment fund. But it looks like it is 'contained'. IOW if you like the Simplicity cost structure, but don't like this particular 'sector' that Simplicity has created, then you don't have to invest in it.

Looking at the target asset allocation for the 'homes and income' fund, there is a 10% allocation to 'community social housing'. The bit you don't like? But on the upside, I guess most of the rent for those properties would be guaranteed by WINZ?

25% allocation to 'residential mortgages'? I don't have a problem with Simplicity providing competition for the banks in this area.

25% allocation to 'unlisted property'? The listed property sector in NZ I find quite limited. There are only eight NZX listed companies that provide suitable liquidity for a fund manager to invest in. And despite the PIE tax benefits they offer, my take is that none of them are bargains. So I can understand the sidestep by Simplicity to unlisted property.

What concerns me the most is the 40% allocation to cash or cash equivalents. Cash is handy for providing access to liquidity for opportunity. But as a long term investment class, cash has traditionally provided the lowest returns. To be fair, Simplicity itself is only suggesting an up to three year time horizon for this investment. High interest rates are likely providing a sweet spot for cash investments right now, that one would not expect to see continue into the future. It seems odd to have a long term target of having 40% of your fund in cash or cash equivalents! But then I thought again about how illiquid those other constituents of this fund are. So it could be the cash is needed to provide for the ebb and flow of investor money, and in particular the position of the fund if a whole lot of investors suddenly want out? Although in practice Kiwisaver is an ever rising tide and Sam Stubbs is on record as saying in the seven years since they have existed, they have never had to sell any investment to meet redemption demand.

It is this high cash allocation that would put me off investing in this fund. But personally I don't have a problem with the rest of the fund allocation. YMMV and obviously does?

SNOOPY

[thegreatestben]

I think the concern Snoopy was that the Simplicity Growth and High Growth funds feature holdings of Simplicity Living in the top 5.
Growth it's number 2 and High Growth it's number 4.

Shane Brealey and Sam Stubbs are people who get things done. They make it very clear they want to do good things and that doesn't have to involve not making money for investors.

[Snoopy]

A Sam Stubbs podcast interview, where he discusses Simplicity's investment in community housing is here::
https://simplicity.kiwi/learn/update...garner-podcast

Notes I have taken from this podcast on his community housing venture are below.

Simplicity manages the savings of 147,000 New Zealanders. Being a charity, the management structure of Simplicity will never make any money, as fees are set 50-70% below the rest of the industry. So they will never be bought out or sold to another market player.

Community housing being built now by Simplicity includes a 51 unit complex of one and two bedroom apartments in Mt Albert (where there is the biggest demand). 10 year leases are on offer, and Simplicity intends to be the long term owner. 42% of people in the OECD live in apartments. In NZ it is about 3%. This is because we have built out, out and out. By land area, Auckland is now the fourth largest city in the world. Building up next to transport hubs, supermarkets and schools is where residential development has to head. Simplicity buys the land, builds the apartments, rents them and maintains them in a vertically integrated 'in house operation'. The building code says you have to build something to last 50 years. Simplicity builds are designed to last 100 years, built out of concrete, brick and aluminium (windows): Never needs washing, never needs painting. But despite the quality build materials, costs are saved by building all of the apartments to be exactly the same, including colour schemes. Interior decor is all white, although tenants are allowed to paint the walls a different colour if they wish. Architects will say that is 'cookie cutter' design. But everything else people buy, be it cars or baked beans, is cookie cutter. Cookie cutter does not necessarily mean poor quality.

In some parts of Germany, renters are into their third generation renting the same house. They regard these long term rental units as their own home and treat them as such. When you have happy tenants with long term occupation security, they are not 'tearing the place up' and they are 'looking after each other'.

Construction expertise has been provided by townhouse developer 'NZ Living' (who have built state houses for Housing NZ before) which was formerly owned by philanthropists Shane and Anna Brearly, who transferred that company to become 'Simplicity Living'. The target for Simplicity Living is to be building 1,000 homes per year within five years Simplicity are even prepared to build on hospital board land and iwi land that they do not own, with suitable lease arrangements in place. Tenants could include the elderly who want to live close to hospitals and hospital staff (including the cleaners) who can avoid 'the big commute'.

What is Sam Stubb's view on the wider housing market, that has drawn him towards taking his own path, via Simplicity, into investment in this space? State house building and private house building were a match for each other up until about 1980. But since then the build rate of state housing has halved, leading to a 45 year supply/demand imbalance that has pushed up house prices well ahead of inflation. Leaving the private sector to take most of the initiative in house building is a convenient way to keep house prices high and house owners feeling wealthy and free to spend their own money. But it also disenfranchises a whole generation that cannot get onto the property ladder. 25% of NZers spend more than 40% of their income on rent or mortgage, making NZ the least affordable country in the OECD in which to live. The last bill you won't pay is the rent or the mortgage. So if you are invested in housing it is very secure cashflow.

SNOOPY

[thegreatestben]

Shane has the right idea and was getting a lot done for Kainga Ora and Kiwibuild but he clearly got the ****s with those programmes being a handbrake.
Pairing up with Simplicity has allowed him to crack on, I've listened to and read alot about what they do and how they do it.

Both are very active and vocal on linked in if you don't already follow:

https://www.linkedin.com/in/shane-brealey-635373297/
https://www.linkedin.com/in/sam-stubbs-2783181a/

Shane and Anna are already very very rich and successful, originally I thought they were cashing out when they announced NZ living was becoming Simplicity Living. I had it all wrong and was letting my pessimism of the average housing developer influence my view. They are bringing the overseas model of BTR to NZ, if they fail it's because they won't be allowed to succeed rather than doing anything wrong.

[Snoopy]

Shane has the right idea and was getting a lot done for Kainga Ora and Kiwibuild but he clearly got the ****s with those programmes being a handbrake.
Pairing up with Simplicity has allowed him to crack on, I've listened to and read alot about what they do and how they do it.

Both are very active and vocal on linked in if you don't already follow:

https://www.linkedin.com/in/shane-brealey-635373297/
https://www.linkedin.com/in/sam-stubbs-2783181a/

I must say when I heard about Simplicity getting into 'Build to Rent', I thought "Do these guys really know what they are doing?" It is one thing to have an image about 'doing the right thing'. But it is quite another to bring such a project to successful fruition. It sounds like Sam Stubbs has teamed up with a pair who indeed 'do know what they are doing.' Reassurance I think for Simplicity customers 'who did not know'.

SNOOPY